In early afternoon trade the cannabis industry is a sea of red as investors head for the exits in their droves.

Here's a summary of how pot stocks are performing today:

The Althea Group Holdings Ltd (ASX: AGH) share price is down over 2% to 45.5 cents.

The Auscann Group Holdings Ltd (ASX: AC8) share price has tumbled 5.5% to 25 cents.

The Cann Global Ltd (ASX: CGB) share price has fallen 6% to 1.6 cents.

The Cann Group Ltd (ASX: CAN) share price has crashed 11% to 88 cents.

The MMJ Group Holdings Ltd (ASX: MMJ) share price is down 5.5% to 17 cents.

Why are cannabis shares crashing lower?

Whilst a series of disappointing quarterly update from North American cannabis companies appears to be weighing on investor sentiment again this week, one particular piece of news seems to be hurting some companies more than most.

According to MarketWatch, Aurora Cannabis reported a sharp quarter on quarter decline in revenue during the September quarter.

It also advised that it plans to halt construction at one of its cannabis-growing facilities in Denmark and delay completing the final construction and activation of its Aurora Sun facility in Canada.

This follows its monitoring of demand for cannabis products in Canada and elsewhere around the world. Unfortunately for the industry, the demand just isn't as strong as many were expecting.

This could be particularly bad news for Cann Group. It is constructing two massive facilities in Victoria and has close ties with Aurora Cannabis.

In March it announced a five-year agreement with the Canadian cannabis giant for the offtake of medicinal cannabis produced by Cann at its existing and planned expansion facilities until 2024.

However, whether Aurora will have any use for this supply is up in the air given the softening demand and oversupply of product.

The post Why ASX cannabis shares are sinking lower on Monday appeared first on The Motley Fool Australia.

Momentum was building, media pundits were talking about the prospect of a new multibillion dollar global pot industry, and even Australian investors were starting to get excited, pumping up the value of Australian marijuana stocks like Auscann Group Holdings Ltd (ASX: AC8) and Cann Group Ltd (ASX: CAN). Everyone was being swept up in a new green wave!

But flash forward about 18 months and the wind has well and truly gone out of the cannabis industry's sails – and not just here in Australia. The big US and Canadian weed companies like Canopy Growth Corp, Aurora Cannabis Inc, and Cronos Group Inc are all well and truly in the red over the last six months.

The main Australian players, Auscann and Cann Group, both hit new 52-week lows in March of this year. And despite making up some slight ground since then, shares in both companies have been trading more or less sideways, with neither able to really break out of their current rut.

It all just goes to show to what degree investors have lost interest in pot stocks. It's probably got a great deal to do with market saturation – in 2018 it seemed like a new cannabis company was popping up on the ASX every week.

In addition to Auscann and Cann Group, there was all manner of medicinal cannabis and pharmaceutical companies fighting for a share of the market's attention. Think Creso Pharma Limited (ASX: CPH), Thc Global Group Ltd (ASX: THC), MMJ Group Holdings Ltd (ASX: MMJ), MGC Pharmaceuticals Ltd (ASX: MXC), Zelda Therapeutics Ltd (ASX: ZLD), Botanix Pharmaceuticals Ltd (ASX: BOT), and Elixinol Global Ltd (ASX: EXL). And that's not even an exhaustive list!

So is there a silver lining?

The global march towards cannabis legalisation does seem to be progressing, even if it's not top of the list for our local legislators. Luxembourg recently announced its plans to become the first European country to legalise recreational weed consumption, and it is urging its neighbours in the EU to follow suit.

According to a recent article in the Los Angeles Times, licensed cannabis sales in California in 2019 are expected to hit US$3.1 billion, making it the largest legal marijuana market in the world. This is also a big increase over the US$2.5 billion in sales generated in the state in 2018. The same article states that Canadians are predicted to spend US$1.1 billion on legal cannabis this year.

The point is, the market for cannabis exists and it is definitely growing, and growing fast. The legal market for marijuana in California alone is expected to more than double to US$7.2 billion by 2024. And yet local and international pot stocks continue to flat line.

Recent developments with Creso Pharma shows what might need to happen to enliven the sector again. The Creso share price surged almost 31% higher in a single day earlier this year when it was announced that it would be acquired by Canadian cannabis company PharmaCielo Limited.

With so many small niche companies currently in operation, the sector definitely feels crowded and in desperate need of some more M&A activity. This is particularly true in Australia, where full legalisation still seems a long way away. Given this environment, it's not unreasonable for an investor to question how the industry can support so many local cannabis companies, particularly over the short term.

Foolish takeaway

My personal opinion is still that this is an industry with a lot of global growth potential ahead of it, although it has demonstrated itself to be particularly risky recently. I still think if you pick your stocks wisely, have a great deal of patience, and maybe get your healthy dose of luck, you could still end up profiting a great deal from cannabis stocks – but you definitely need to have a long-term focus and a big appetite for risk.

The post Should you still be invested in ASX marijuana shares? appeared first on The Motley Fool Australia.

This left the cannabis company's shares trading within touching distance of their 52-week high.

What did MMJ announce?

This afternoon MMJ announced that it has agreed to invest C$2.5 million in privately-held Sequoya Cannabis Limited.

This investment consists of a C$2.5m convertible note which may be converted into approximately 34% of Sequoya's issued capital within two years.

Sequoya is a Poland-based cannabis extraction company which is focused on becoming a significant GMP-certified hemp cannabidiol supplier. It also has longer term plans to expand into the legal medical marijuana market across Europe.

According to the release, cannabidiol production from hemp is legal across Europe with no cross-border tariffs within the European Union. Additionally, no specific permits are required for producing hemp-derived cannabidiol in Poland.

Management appears confident that the investment will provide an excellent return on investment for a number of reasons.

It explained: "Sequoya is focusing on extraction, which is the highest value opportunity, within the cannabis ecosystem and it is building a large-scale production plant in a low-cost jurisdiction which has easy no-tariff access to high value markets (eg Germany and Northern Europe)."

It also believes that the company's ability to produce GMP certified product at a lower cost in Europe will be a strategic advantage.

And finally, Poland provides access to world class technicians and engineers at a substantially lower cost than available elsewhere. Some of which are already working with the company.

MMJ's chairman, Mr Peter Wall, appeared to be very pleased with the investment.

He said: "This is another example of MMJ's strong market and financial discipline identifying opportunities and bottlenecks in the cannabis value-chain in markets and acting quickly. "The investment demonstrates MMJ's capacity to secure investments in private cannabis businesses which are not generally available to Australian retail and institutional investors."

Elsewhere in the industry today, the Althea Group Holdings Ltd (ASX: AGH) share price remains in its trading halt whilst it prepares a capital raising for an acquisition and the Auscann Group Holdings Ltd (ASX: AC8) share price is trading flat.

The post Why this ASX cannabis company's shares pushed higher today appeared first on The Motley Fool Australia.

This was driven largely by investor optimism after the Federal Government announced changes to regulations that permitted the export of medicinal cannabis.

Since then investor optimism has slowly been fading, possibly due to the perceived lack of progress that has been made by many cannabis companies in respect to revenue generation.

Things have been particularly disappointing for shareholders this year, with the majority of cannabis shares underperforming the market.

Here's how these shares have performed in 2019:

The AusCann Group Holdings Ltd (ASX: AC8) share price has tumbled 44% since the start of the year. Not even news that AusCann has been added to the All Ordinaries index has been enough to lift its share price.

The Cann Group Ltd (ASX: CAN) share price is up 2.5% year to date. However, this is thanks to a 37% jump in its share price over the last 10 days. This was driven by a revision to its expansion plans and news of an offtake agreement with Canadian cannabis giant Aurora Cannabis.

The Creso Pharma Ltd (ASX: CPH) share price has tumbled 35% lower since the start of 2019. This is despite the company announcing that its Canada-based operation has been granted a license to cultivate cannabis. This makes Creso the only ASX-listed company that has 100% ownership of a Canadian licensed producer.

The MMJ Group Holdings Ltd (ASX: MMJ) share price is trading flat year to date. Last month MMJ released its half year results and revealed half year revenue of $152,000 and a half year loss of $13.1 million.

The THC Global Group Ltd (ASX: THC) share price has been a positive performer and is up 15% year to date. Its shares are in a trading halt today pending an announcement relating to the completion of an acquisition in Nova Scotia, Canada.

The post Here's how these ASX cannabis shares have performed in 2019 appeared first on The Motley Fool Australia.

Cann Group Limited (ASX: CAN) and THC Global Group Limited (ASX: THC) have both shed about 40% of their market caps, while shares in Auscann Group Holdings Ltd (ASX: AC8), MMJ Group Holdings Limited (ASX: MMJ) and Creso Pharma Limited (ASX: CPH) are all down over 50%. Suffice to say, this makes for pretty unpleasant reading for investors, like myself, who thought 2018 was going to be a banner year for the global cannabis industry.

And 2018 certainly did start out with a bang. New Year's Day 2018 marked the official start date for the legal sale of the drug for recreational consumption in California, and local pot stocks surged higher. Investors flocked to Auscann in particular, and its share price doubled during the first week of January.

But since those heady days the industry has really come off the boil. The legalisation date for recreational weed in Canada came and went in October, to extremely limited fanfare in Australia. A lot of us were expecting big things when the first of the G7 nations enacted legislation to legalise the recreational consumption of cannabis, and the lukewarm response on local markets was especially disappointing.

So what can we expect from the global cannabis industry in 2019?

A new more liberal US Congress in 2019 may mean that marijuana laws will continue to be relaxed across America. This could pave the way for new states to be added to a growing list of those that have already legalised weed and which already includes California, Alaska, Colorado, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont and Washington.

All this is to say that there is still a lot of growth potential in the global cannabis industry. According to an article by the Associated Press, legal marijuana was a US$ 10 billion industry in the US in 2018 and this should only increase in 2019, especially if more states legalise weed. Plus the Canadian market is still only in its infancy and should also continue to grow.

Many of the ASX listed pot stocks come with North American exposure. For example, small cap MMJ is a listed investment company that manages a portfolio of holdings in global cannabis companies. In addition to Australian-based Cannabis Access Clinics and Martha Jane Medical, its investments also include many Canadian companies like Harvest One and Weed Me.

And, of particular relevance for Australian medicinal cannabis companies, countries in the Asia Pacific region are also beginning to adopt more progressive drug policies: both Thailand and South Korea recently legalised medicinal marijuana. This could boost the export potential of the bigger, more established local players like Auscann and Cann Group.

Foolish takeaway:

Despite the fact that some of the wind has gone out of the sails of ASX pot stocks over the last year, I'm still reasonably bullish on the longer-term prospects for the global cannabis industry. It's particularly exciting that Australian trading partners in the Asia Pacific region are enacting progressive drug policies.

One important thing to note is that, apart from Auscann and Cann Group, most of the other ASX listed cannabis companies are pretty small players with market caps under $100 million. This makes them risky investments, particularly at a time when equity markets are becoming more volatile. As such, if you have an interest in the cannabis industry it might be better to add them to your watch lists to see how they perform over the medium-term before committing to purchasing shares.

The post Can these ASX pot stocks deliver growth in 2019? appeared first on The Motley Fool Australia.

But one area of the market which has avoided the sell off and started the year on a high is the cannabis sector.

A number of cannabis-focused companies have pushed significantly higher on Wednesday. Here's the current state of play:

The Auscann Group Holdings Ltd (ASX: AC8) share price is almost 8% higher at 62 cents despite there being no news out of it. Just before Christmas AusCann announced that executive director Dr Paul MacLeman will act as interim CEO from January 1 until a full-time appointment is made by the board.

The Creso Pharma Ltd (ASX: CPH) share price has stormed 15% higher to 56.5 cents after Israel's Parliament approved a law for exporting medicinal cannabis and a new regulatory structure to approve foreign ownership of Israeli medicinal cannabis operations. Management believes Creso is well positioned to take advantage of these changes via its 74% stake in a joint venture with Israeli-based Cohen Propagation Nurseries.

The MGC Pharmaceuticals Ltd (ASX: MXC) share price has climbed 5% to 4.2 cents. MGC Pharmaceuticals is another company that could benefit from the law changes in Israel. The founders of the European-based specialist medical cannabis company are all prominent figures in the Israeli medical cannabis industry.

The MMJ Group Holdings Ltd (ASX: MMJ) share price has pushed 6% higher to 25 cents. MMJ also has exposure to the Israel market through its 100% stake in an Israeli cannabis R&D company Phytotech Therapeutics.

The Zelda Therapeutics Ltd (ASX: ZLD) share price has stormed 13.5% higher to 5.9 cents despite there being no news out of it. Despite this gain, its shares are down around 60% since this time last year.

One company that has missed out on today's gains is Cann Group Ltd (ASX: CAN). The Cann share price is down 2% in afternoon trade despite the positive investor sentiment in the industry and news that an insider was buying shares last week.

The post ASX cannabis shares have started the year on a high appeared first on The Motley Fool Australia.

When retailers in California officially opened their doors to recreational pot smokers on 1 January, 2018, the share prices of Aussie pot stocks went bananas. In the first week of January, the price of shares in Auscann Group Holdings Ltd (ASX: AC8) almost doubled, Hydroponics Company Ltd (ASX: THC) and Cann Group Ltd (ASX: CAN) both surged almost 50% higher, and MMJ Phytotech Ltd (ASX: MMJ) gained over 30%.

But since then shares in all the main Aussie pot stocks have trended way down. Leaders in the industry, Cann Group and Auscann, have held up the best, but even they have shed about a third of their market caps since that heady first week in January. Smaller, more risky companies like MMJ, Creso Pharma Ltd (ASX: CPH) and THC have all basically halved in value.

So what can we expect from the Aussie pot stocks in a few weeks when selected stores in Canada begin selling weed?

It's hard to say. The market has known that this day has been coming for a long time now. Although the Canadian senate only officially passed the C-45 Bill, known as the Cannabis Act, in June, legalising marijuana had been a key pledge of Canadian Prime Minister Justin Trudeau during his election campaign as far back as 2015.

But the same could have been said for California. Proposition 64, also known as the Adult Use of Marijuana Act, which legalised cannabis in California, became law in November, 2016. So the market had a long time to try and price in the impacts of the new law – and yet it still seemed to come as a surprise to everyone when weed stores actually opened their doors in January.

However, since then, it does feel like the idea of a recreational cannabis industry has become much more normalised. It has even been reported this month that the Coca-Cola Company is considering selling beverages infused with cannabidiol, a non-psychoactive ingredient present in marijuana.

That's where the world is now, most likely because the situation in California has helped to normalise the conversation. However, as recently as January, California still represented a big test case for the global weed industry. At that time a handful of American states had already legalised marijuana for sale and consumption, including Colorado, Washington, and Massachusetts.

But California was different. This was America's most populous state and the world's fifth largest economy. Putting aside the symbolism of a G7 nation passing federal laws to legalise marijuana, the fact that California was selling weed was a much bigger deal financially than what's about to happen in Canada.

Foolish takeaway:

No one has a crystal ball – and if we did we'd all be millionaires.

I own shares in a number of pot stocks and have ridden the industry highs and lows over the last couple of years. I hope for a favourable reaction from the ASX in the period leading up to and immediately following the first recreational marijuana sales in Canada next month. But I do think the impact will be much more subdued than what we saw in January.

If you're looking for some local exposure to the industry, the big players like Cann Group and Auscann are probably the lowest risk options. Otherwise, MMJ and Creso Pharma both offer avenues into the Canadian market through their international interests or subsidiaries, but given their tiny market caps, they carry significantly higher risk. I would even say that, unless their share prices can gather some significant momentum in the short term, I would currently classify them as below investment grade.

The post Are Aussie pot stocks set to smoke the market in October? appeared first on The Motley Fool Australia.

Hydroponics Company Ltd (ASX: THC)

The Hydroponics company share price was trading at above $1 at the start of this year but has since lost more than half its value with shares in the company now going for about 48 cents. However, despite the losses incurred so far over 2018, the Hydroponics Company share price is still up by more than 70% on the 28 cents the company's shares were selling at a year ago.

MMJ Phytotech Ltd (ASX: MMJ)

It's been worse for MMJ Phytotech shareholders with shares in the company shedding almost 60% so far this year with a current price of around 25 cents. MMJ Phytotech's market value has now dropped to below $60 million, having lost more than 30% over the past year.

Botanix Pharmaceuticals Ltd (ASX: BOT)

Botanix shareholders have had a better year, with shares in the company almost doubling over that period. But more recently the Botanix share price has been heading down. At the end of May, Botanix shares were trading for about 18 cents but you can pick them up today for around 10 cents.

Cann Group Ltd (ASX: CAN)

Cann Group shareholders have done well over the past year with shares in the company gaining more than 180%. But recently it seems Cann Group is starting to suffer the fate of the other medical marijuana companies. Cann Group shares have lost about 30% since late June.

Auscann Group Holdings Ltd (ASX: AC8)

The Auscann Group share price is up by more than 60% in a year despite embarking on a downward trend since early January. Auscann shares were trading at around $1.85 in early January but are now fetching about 86 cents. On Monday, Auscann shares lost about 8 per cent.

What went wrong?

Australia's pot stocks have largely been the domain of speculators. With the companies yet to turn profits amid skyrocketing market valuations, such corrections as outlined above were inevitable. So, will they continue to fall? While companies continue to burn cash with no sign of profits in sight, it's highly likely.

The post Up in smoke: What happened to the ASX pot stocks? appeared first on The Motley Fool Australia.

How are the established local players positioning themselves to take advantage of what could be a new period of growth?

After a frantic period at the beginning of this year, buoyed by news of marijuana legalisation in California and its impending legalisation in Canada, excitement around Australian medicinal cannabis stocks has died down over the last few months.

The bigger players on the ASX, like Cann Group Ltd (ASX: CAN) and Auscann Group Holdings Ltd (ASX: AC8), which both benefited from big gains in their share price over December and January, have seen their market valuations slide lower recently as some of the momentum has gone out of the sector.

But the cannabis industry might be set to start making global headlines again: at the beginning of June, the Canadian senate finally passed a bill to legalise recreational cannabis consumption nationwide, paving the way for legal retail sales to commence as soon as early to mid-September.

It is the second country in the world, after Uruguay, to fully legalise recreational cannabis, and the first of the economically advanced G7 nations to do so.

This makes it a significant global test case – other developed nations, including Australia, will keenly observe how the Canadian industry will be regulated, and how much money it will be worth.

These international developments could mean that investor focus will return to the cannabis industry soon. So it might be worth taking a look at some of our local Australian marijuana companies to see how they are positioning themselves to take advantage of what could be another period of growth.

Cann Group Ltd

Cann Group is the biggest pot stock listed on the ASX with a market cap over $400 million. It was also the first company in Australia to be issued licenses for both medicinal cannabis research and cultivation, giving it a significant head start over other newer entrants to the industry.

More recently the company has taken steps to shore up its international exposure, obtaining permits from local regulators as well as Health Canada to allow the importation of genetic material from its Canadian partners into Australia.

Cann Group also recently announced that it had signed a heads of agreement for the lease and build of a proposed new multi-stage cannabis cultivation plant.

Once completed, the 37,000 square metre facility would be the largest of its kind operating in Australia. If the Canadian test case results in softening political attitudes towards cannabis in Australia, this facility could position Cann Group as the frontrunner in domestic cannabis cultivation and distribution.

Auscann Group Holdings Ltd

Auscann has also had a busy few months. In early June, it announced that its Chilean joint venture had harvested its second crop of cannabis; the 620kg yield represented more than a 50% increase on the prior year's crop.

The South American market is becoming significant internationally as Argentina, Colombia, Uruguay and Chile have all legalised marijuana for medicinal use.

It also appointed a new Master Grower for its Tasmanian operations, with the aim of accelerating its production capabilities. The man they chose for the job, Luke Pigeau, has extensive experience in marijuana cultivation with established Canadian companies.

Auscann has further strengthened its Canadian connections by establishing a research and development agreement with Canadian company Jade Cannabis. The hope is that the two companies will work together to find ways of achieving greater and more cost-effective yields.

Auscann also completed a $33.4 million share placement offered to institutional and sophisticated investors in North America and Australia. It also plans to raise a further $8 million through a share purchase plan with other eligible shareholders.

This will dilute the share price in the short term, but could add to the company's longer-term growth potential: Auscann intends to spend the proceeds on further research and development, clinical studies, and expansion of its Australian and Chilean operations.

Others pot stocks

Smaller players with Canadian interests or subsidiaries like MMJ Phytotech Ltd (ASX:MMJ) and Creso Pharma Ltd (ASX:CPH) will also be worth watching in the coming months, though with less established local manufacturing operations they carry significantly more investment risk than the bigger Australian companies.

The post Canada to legalise smoking pot: Can these stocks smoke the ASX? appeared first on The Motley Fool Australia.

Here is the state of play so far in FY 2019 for four of the larger players:

The Auscann Group Holdings Ltd (ASX: AC8) share price has fallen 4% since the start of the financial year. A $33.4 million share placement to institutional and sophisticated investors from North America and Australia at $1.10 per share has weighed on its shares and led to a 7% decline on Thursday.

The Cann Group Ltd (ASX: CAN) share price has tumbled almost 17% so far in FY 2019. This means it has given back almost all gains made at the back end of FY 2018 when its shares rallied following an agreement to lease and build Cann Group's Stage 3 cultivation and GMP manufacturing facility near Melbourne airport.

The Hydroponics Company Ltd (ASX: THC) share price is down almost 4% so far in FY 2019. Earlier this week the company advised that it had entered a binding term sheet for the exclusive leasing rights of organic certified land in northern New South Wales. Hydroponics Company intends to use the land to grow medicinal cannabis, subject to necessary statutory and regulatory approvals.

The MMJ Phytotech Ltd (ASX: MMJ) share price has dropped 3% since the start of the new financial year. At the start of the week MMJ Phytotech announced that it has invested C$5 million for a 6.9% shareholding in privately-held MediPharm Labs as part of its C$22.3 million funding round. MediPharm owns Canada's largest medical cannabis oil production facility that will support 100,000kg of annual dry cannabis processing.

So why are cannabis shares sinking lower?

This week the University of New South Wales released the results of a four-year study into medicinal cannabis use for the treatment of chronic pain.

The study, conducted by the National Drug and Research Centre (NDARC), found "that participants who were using cannabis reported over a series of assessments they were experiencing greater pain and anxiety, were coping less well with their pain, and reported that pain was interfering more in their life, compared to those not using cannabis. There was no clear evidence that cannabis led to reduced pain severity or pain interference or led participants to reduce their opioid use or dose."

While this is of course just one study, it is arguably a major setback for the industry and potentially a reason for concern. Especially given how lucrative the chronic pain market is and how many were targeting it.

I would suggest investors keep their powder dry and wait for supportive data and sales before investing in this high-risk industry.

The post Why medicinal cannabis shares have been smoked this week appeared first on The Motley Fool Australia.

Four shares that have climbed more than most today are listed below. Here's why they are ending the week with a bang:

The Afterpay Touch Group Ltd (ASX: APT) share price has stormed almost 9% higher to $9.34 after being upgraded to a buy rating from neutral by Goldman Sachs. The broker made the move after an assessment of its U.S. opportunity. Goldman has increased the price target on Afterpay Touch's shares to a lofty $11.15. While it is a high risk investment, I think the risk/reward on offer is compelling.

The Cann Group Ltd (ASX: CAN) share price has continued its stellar run and is up another 8% to $3.46. The medicinal cannabis company's shares have now risen 24% since it announced the signing of an agreement for the lease and build of its Stage 3 cultivation and GMP manufacturing facility near Melbourne Airport.

The MMJ Phytotech Ltd (ASX: MMJ) share price has climbed 6% to 33.5 cents after its Weed Me Inc business secured an exclusive Canadian partnership with Amsterdam-based seed producer, Dutch Passion. The agreement means that Weed Me has the rights to bring to market Dutch Passion branded products like cannabis flowers and pre-rolls.

The Retail Food Group Limited (ASX: RFG) share price has rocketed 23% to 52.5 cents after the embattled food and beverage company finally released some good news to the market. That news was that its lenders have agreed to waive testing of the financial covenants under its senior debt facilities with respect to the period ending 30 June 2018. There were concerns that its results would breach debt covenants and put its future at risk.

The post Why these 4 ASX shares are ending the week with a bang appeared first on The Motley Fool Australia.

Canada becomes only the second country in the world to legalise the recreational use of marijuana. By September this year Canadians may be able to buy consume or buy cannabis.

The PM of Canada, Justin Trudeau, said on Twitter "It's been too easy for our kids to get marijuana – and for criminals to reap the profits. Today, we change that. Our plan to legalize & regulate marijuana just passed the Senate. #PromiseKept"

According to some estimates, around US$4.5 billion was spent on cannabis in 2015.

Under the new rules, adults will be allowed to have up to 30g of dried cannabis in public. The government will set out regulations about foods that have cannabis in it.

However, it will still be illegal to have more than 30g, buy from an unlicensed cannabis dealer or be growing more than four cannabis plants for households.

This will generate a lot of tax dollars as well as give individuals more freedom.

There are a number of medicinal cannabis companies that are trading on the ASX which may react positively or negatively to this news. My colleague, James Mickleboro, has already discussed how this might affect AusCann Group Holdings Ltd (ASX: AC8).

I wouldn't be surprised to see excited traders send the share prices of many the medicinal companies higher like Cann Group Ltd (ASX: CAN), MMJ Phytotech Ltd (ASX: MMJ), Creso Pharma Ltd(ASX: CPH), Hydroponics Company Ltd (ASX: THC), Zelda Therapeutics Ltd (ASX: ZLD) and MGC Pharmaceuticals Ltd (ASX: MXC)

Investors may believe that Canada legalising cannabis makes Australia legalising it one step closer.

Foolish takeaway

However, despite the growing excitement surrounding the cannabis industry readers must remember that there is very little revenue and zero profit being generated across the industry.

Many of the above companies have valuations worth tens (or more) of millions of dollars. Right now, using standard valuation methods, they are not worth that. Perhaps in the long-term they will be profitable but that's a long time away.

The post Canada legalises recreational cannabis use appeared first on The Motley Fool Australia.

The medicinal cannabis company's shares finished the day down by almost 14% at $1.08. Whereas industry peers Cann Group Ltd (ASX: CAN) and MMJ Phytotech Ltd (ASX: MMJ) posted gains.

Why did the AusCann Group share price plunge lower?

With no news out of AusCann, the decline is a little bit of a mystery. Whilst some have speculated that it is tax loss selling, I think it could be related to news that Canada has legalised recreational cannabis use.

Although this might seem like a positive event, there is a bit of a twist that could make it a negative for some cannabis companies.

Legalising cannabis contravenes Canada's pledge to adhere to existing drug-control conventions set by the UN.

In a chat with CEO Dr Elaine Darby a few months ago, I understood that such a move could lead to Canada being restricted from exporting narcotics such as cannabis.

This could potentially mean that the future importation of Canopy Growth Corp products is under threat.

As per its April announcement, AusCann is importing products for chronic and neuropathic pain control known as AC 5:5, AC 0:9.5, and AC 15:0. In addition to this, it was working on developing an arrangement where Canopy would supply AusCann with Spectrum Cannabis branded products to distribute into the Australian market alongside existing AusCann products.

All being well AusCann has already imported these products and is fully stocked up, but judging by its share price decline today, some may fear it may not have.

In light of this, I think it may be prudent for investors to stay clear of its shares for the time being while the situation develops and more details are known.

Though, it is worth pointing out that after the market closed AusCann responded to an ASX price query by advising that it "is not aware of any information concerning it which has not been announced to the market which, if known by some in the market, could explain the recent trading in its securities."

The post Is this why the AusCann Group Holdings Ltd (ASX:AC8) share price fell 14%? appeared first on The Motley Fool Australia.

An example today is the proliferation of medical marijuana companies recently listed that claim to be ready to cash in on the 'marijuana boom'.

Unsurprisingly, the ASX is a leader in this space with around a dozen "pot stocks" gaining increasingly large valuations as less-sophisticated retail investors buy into their stories on the back of stories framed by the changing legislative environment.

Legislative wheels roll slowly and legislation around loosening laws around the production, sale, and export of marijuana for medical purposes in Australia has been in the pipeline for a long time.

As such several companies have sprung up in an attempt to profit from the changes around cannabis use in Australia.

Auscann Group Holdings (ASX: AC8) has former politicians among its board members and has so far been the most successful medical marijuana hopeful in selling its story to the general public and media.

So successful in fact that it now has a market value around $407 million based on a share price of $1.47 with more than 276 million fully paid ordinary shares on issue as at its last disclosure to the market on May 15, 2018.

The company has 144.166 million ordinary shares quoted on the ASX and 132.707 million ordinary shares "not quoted" on the ASX. The share count is also likely to rise as options issued to insiders may be exercised to buy shares at prices substantially below today's.

While this will benefit the owners of the options (if they're in the money when exercisable) it will dilute ordinary shareholders in terms of any future earnings per share on issue.

But with a $400 million market cap Auscann must be turning big profits right?

Wrong, in fact it doesn't even have any revenue as yet.

Yep, zero sales and a $400 million valuation, with nobody smoking reefers.

In its most recent quarter Auscann posted an operating loss of $1.5 million, with a forecast operating loss of $2 million in the current quarter. As at March 31 2018 it had $11.9 million cash in the bank to fund its high-growth plans and day-to-day operations.

So what does Auscann have going for it other than being in the popular medical marijuana sector?

Well it has Canada's Canopy Corporation as a major shareholder and a tie-up with a Chile-based medical marijuana group now known as DayaCann.

Its management has also taken advantage of new legislation to secure various different permits or licences to import or export cannabis-based medical products, or grow marijuana to sell commercially for medical purposes in Australia.

It was the Jan 4 2018 news that the Federal government would permit the export of medical marijuana products that sent its shares from 84 cents to above $1.70 in early January in a move that shows how public sentiment around deregulation is driving the value of the company, rather than operational performance or cash flows.

Auscann will need to sell a huge amount of cannaboid-based medicines in the future to get anywhere close to justifying today's valuation. With no revenue as yet it looks way over-valued and a good example of how the public's appetite for "boom" stocks knows no credible limits.

Take note that serious investors buy companies with revenues and profits, while the penny stock end of the market is left to the less sophisticated punters and marijuana evangelists.

Others in the medical marijuana space with big valuations and missing revenues include MMJ Phyotech Ltd (ASX: MMJ) and Cann Group Holdings Ltd (ASX: CAN). I'd avoid them as well to look for companies spitting out consistent profits and dividends…

The post Are you gullible enough to buy ASX pot stocks? appeared first on The Motley Fool Australia.

At the time of writing the medicinal cannabis company's shares are up a whopping 18% to $3.54.

Why are Cann Group's shares rocketing higher today?

Cann Group's shares are on fire today because of speculation that it is a takeover target for its strategic partner Aurora Cannabis which currently owns a 22.9% stake in the company.

According to the AFR, the C$4.3 billion cannabis giant is rumoured to be interested in acquiring Cann Group for a sizeable $4.50 per share, valuing it at approximately $500 million.

Considering Cann's sizeable production facilities, changes in regulations to allow medicinal cannabis exports, and its existing stake, I can't say I'm overly surprised by the speculation.

However, it is worth noting that Cann Group has put out a response this morning that acknowledges the speculation but denies that a formal approach has been made.

It did admit that preliminary discussions had been made, stating that Cann Group: "has recently had very preliminary and confidential discussions with Aurora in relation to a potential transaction. However, there is no certainty that any formal offer or transaction will eventuate."

Before adding that it: "will properly consider any offer or proposal it may receive having regard to all the alternatives available to the company."

As you might imagine, this news has sent the shares of fellow medicinal cannabis companies surging higher.

At the time of writing the Auscann Group Holdings Ltd (ASX: AC8) share price is 5% higher to $1.76, Creso Pharma Ltd (ASX: CPH) is 3% higher, MMJ Phytotech Ltd (ASX: MMJ) is up 4%, and Hydroponics Company Ltd (ASX: THC) shares are up a sizeable 7%.

AusCann would be the next likeliest company to receive a takeover approach in my opinion. Especially given its strong management team, licence advantage, and strategic partnership with C$5.4 billion cannabis giant Canopy Growth Corp, which owns a sizeable stake in AusCann.

The post Medicinal cannabis company Cann Group Ltd rockets on takeover speculation appeared first on The Motley Fool Australia.

In morning trade a number of shares in the industry have pushed notably higher. Here's why these three are climbing:

The Auscann Group Holdings Ltd (ASX: AC8) share price is up 3.5% to $1.46 despite there being no news out of the leading medicinal cannabis company. Investors continue to snap up AusCann shares in the belief that it is the best-placed company in the space to profit from recent regulatory changes. I think investors are spot on with this one and believe AusCann will have a bright future ahead of it if everything goes to plan.

The MMJ Phytotech Ltd (ASX: MMJ) share price is up over 2.5% to 38 cents after the diversified cannabis company announced that it has invested C$1 million for an approximate 1.6% shareholding in privately held Fire & Flower Inc. According to the release, Fire & Flower Inc is a Canada-based cannabis retailer that plans to open 37 retail locations in the province of Alberta alone once permitted by regulatory bodies. This investment leaves MMJ Phytotech with a cash balance of A$1.8 million, which I suspect could mean a capital raising is around the corner. Unless it chooses to offload its Cannabis Wheaton shares.

The Zelda Therapeutics Ltd (ASX: ZLD) share price has jumped 9% to 12 cents after the cannabis-based biotechnology company released an update on its insomnia clinical trial. According to the release, recruitment for Australia's first clinical study of medical cannabis to treat insomnia is now complete. As a result, the next phase of the study will commence shortly at the University of Western Australia Centre for Sleep Science with patients undergoing baseline sleep measurements before commencing pharmaceutical dosing. Results are expected before the end of the year, with the company aiming to rapidly pursue commercialisation activities if the trial is a success.

The post Why these medicinal cannabis companies are charging higher today appeared first on The Motley Fool Australia.

Four shares that haven't let that hold them back are listed below. Here's why they are defying the market and ending the week on a high:

The Adairs Ltd (ASX: ADH) share price has rocketed 17% higher to $2.16 after the resurgent retailer provided the market with a trading update. According to the update, thanks to the strong performance of its autumn and winter range management has upgraded its full-year guidance. Adairs is expected to report earnings before interest and tax of $44 million and $46.5 million, up from its previous guidance of between $40 million and $44 million.

The Kidman Resources Ltd (ASX: KDR) share price has climbed 7% to $2.01 despite there being no news out of the lithium miner. But with its shares down almost 20% during the last 30 days prior to today's trade, it appears as though some investors thought that Kidman Resources' shares had fallen to an attractive entry point.

The MMJ Phytotech Ltd (ASX: MMJ) share price is up 4% to 37.5 cents after the medicinal cannabis company announced a strategic alliance with Calgary-based CBi Capital. According to the release, CBi provides capital and expertise to high growth, early-stage companies in the global cannabis industry. The two parties will look at co-investment opportunities in the cannabis space.

The Retail Food Group Limited (ASX: RFG) share price has risen 4% to 92.5 cents on news. The embattled food and beverage franchisor is one of the more volatile shares on the market at the moment and prone to wild swings in its price. Although its shares looks very cheap, I would suggest that investors stay well clear of the company.

The post Why these 4 ASX shares are ending the week on a high appeared first on The Motley Fool Australia.

Thanks to the government lifting the ban on medicinal cannabis exports, a number of cannabis shares finished the quarter with strong gains.

Here's what you need to know:

The Auscann Group Holdings Ltd (ASX: AC8) share price has surged 81% higher since the start of the year. Investors appear to believe that AusCann is one of the best positioned cannabis companies to profit from the regulatory changes. Its strong ties with C$6 billion cannabis giant Canopy Growth Corp certainly will help.

The Botanix Pharmaceuticals Ltd (ASX: BOT) share price is up 71% year-to-date. The main catalyst for this gain has been the company's successful trials of its acne treatment product. The promising results allowed the company to raise $15 million through an institutional placement. The funds raised will be used to accelerate clinical development of its lead product, BTX 1503, and progress other key pipeline products.

The Cann Group Ltd (ASX: CAN) share price has climbed 4% so far in 2018. Like AusCann, Cann is seen as another company that could profit greatly from recent regulatory changes. After all, the company has significant growing capabilities at its facilities in Victoria. I suspect its shares haven't climbed as much in 2018 due to their sizeable gains last year.

The Cannpal Animal Therapeutics Ltd (ASX: CP1) share price is 10% higher year-to-date. Last month this animal health-focused cannabis company advised that it has successfully imported cannabis oils for the clinical trial of its lead drug candidate, CPAT-01. CPAT-01 is a cannabis-derived medicine being developed as a treatment for pain in companion animals. Management estimates the market to be worth US$1.4 billion per year.

The Creso Pharma Ltd (ASX: CPH) share price has been an exception and is down 22% since the start of the year. Like Cann Group, Creso Pharma's shares went gangbusters in 2017. This appears to have led to its shares coming under pressure from profit taking this year. 2018 looks likely to be a big year for Creso after the launch of a multitude of new products.

The MMJ Phytotech Ltd (ASX: MMJ) share price has also failed to follow the industry higher and is down 18% year-to-date. A number of sudden changes in the C-suite appear to have spooked the market.

The Hydroponics Company Ltd (ASX: THC) share price has fallen 26% so far this year. Like MMJ Phytotech, Hydroponics Company has also seen a change at the top. Last month its CEO David Radford handed in his resignation out of the blue a day after the departure of its chief commercial officer.

The Zelda Therapeutics Ltd (ASX: ZLD) share price is 11% higher year-to-date. Last month Zelda announced the expansion of its pre-clinical pancreatic cancer research collaboration with Curtin University. New research activities will include animal model studies that will be pivotal to facilitating future human clinical trials.

The post Australian medicinal cannabis industry Q1 update appeared first on The Motley Fool Australia.

When and for what medical purposes medical cannabis derivatives can be prescribed is still up to state governments to decide, with the legislation yet to translate into sales for any of the pot stock companies.

At the start of 2018 the sector received more good news when the government announced it would permit the export of cannabis overseas for medical use. Again though the legislation is new and yet to translate into anything in the way of sales or forward sales contracts for pot stock hopefuls.

Some studies have estimated that medical cannabis in Canada retails for around CAD$7.5 per gram and theoretically Australian cannabis could retail at a similar price, which means 5 tonnes of the crop could harvest around A$37,500,000. Even if not that much it's clear there's serious money to be harvested in the sector if it delivers on its potential.

These sales estimates are exciting investors, because of the particular potential for weed to be legalised for recreational use in Canada and across many U.S. states.

Exactly how much weed is smoked recreationally in Canada annually is unclear, but ballpark estimates have it as around 600,000 to 800,000 kilograms a year.

Canadian producers alone are expected to meet this supply, but that's not stopping others attempting to cash in on the growth in demand for cannabis for recreational or medical purposes globally.

If one of the ASX's many medical marijuana hopefuls can deliver some meaningful sales it will then need to make a profit on those sales to take the next step to becoming investment grade.

Serious investors generally only buy profitable companies, or those with a long track record of revenue growth and visible path to profitability ahead.

As such the medical marijuana sector on the ASX largely consists of companies spinning stories about their potential to grow sales as the legislative environments in Australia, Europe and North America offer growing opportunity to commercialise cannabis-based medical products.

Estimates for the value of the medical marijuana sector Down Under range from $75 million per year to $1 billion per year, depending on where you check or who you ask. The reality is that no one knows the size of different markets as it would depend on what medical marijuana products were available and on what basis doctors would prescribe them among many other factors.

Some of the pot stock hopefuls on the ASX include MGC Pharmaceuticals Ltd (ASX: MXC), MMJ Phytotech Ltd (ASX: MMJ), Zelda Therapeutics Ltd (ASX: ZLD), Botanix Pharmaceuticals Ltd (ASX: BOT), Cann Group Ltd (ASX: CAN) and Auscann Group Holdings Ltd (ASX: AC8).

Even failed software business 1-Page Ltd (ASX: 1PG) and bauxite miner Queensland Bauxite Limited (ASX: QBL) are attempting to cash in on cannabis-crazed investment markets.

I suspect very few of these companies will provide investors respectable long-term returns based on their current valuations. As such it's a sector to avoid in my opinion.

The post Can Australians get rich quick in the pot stock sector? appeared first on The Motley Fool Australia.

Four shares which haven't been able to follow the market higher today are listed below. Here's why they started the week in the red:

The Citadel Group Ltd (ASX: CGL) share price has fallen 5.5% to $6.77. This morning the technology company reported a 13% increase in revenue to $47.5 million and a 23% lift in net profit after tax to $6.6 million. The company also advised of accounting errors in the prior corresponding period's results. That error meant that revenue was overstated for the prior half-year and was possibly the reason for today's share price decline.

The InvoCare Limited (ASX: IVC) share price has tumbled 7.5% to $14.30 following the release of the funeral operator's half-year results. Although InvoCare delivered a strong first-half result, its guidance for the short-term was weaker than expected and doesn't really justify the premium that its shares trade at. While I think InvoCare is a quality business, I would prefer to buy in at a cheaper price.

The MMJ Phytotech Ltd (ASX: MMJ) share price has dropped 4% to 46.5 cents. This morning the medicinal cannabis company announced that Andreas Gedeon will retire as its managing director and CEO in order to devote his attention to Canada-based Harvest One Cannabis Inc. Jason Conroy will take over from Mr Gedeon on February 26. Investors appear to have been left surprised by the sudden change at the top.

The Woodside Petroleum Limited (ASX: WPL) share price has fallen 7% to $28.91 after the energy company announced the successful completion of its institutional entitlement offer. According to the release, Woodside raised gross proceeds of approximately $1.57 billion at a discount of $27.00 per new share and received strong support from existing institutional shareholders. Over 90% of eligible institutional shareholders elected to take up their entitlements.

The post Why these 4 ASX shares started the week in the red appeared first on The Motley Fool Australia.